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Your opportunity to access forecast returns of 11% p.a in year 1, from a diversified selection of assets in Dairy: New Zealand’s #1 export industry.
Rimu Dairies LP aims to deliver strong investor returns from the best of New Zealand’s dairy sector.
Forecast cash returns of 11% p.a. in year 1, with 7.5% p.a. thereafter.
Income will come from the partnership’s three assets:
The forecast return is based on a combination of dairy farm earnings (70% of revenue) and dividends from the shareholdings (30% of revenue).
Why Dairy?
Dairy is a powerhouse of the New Zealand Economy and our largest export, with annual dairy exports valued at $22bn. After a difficult period, the sector has been through a reset over the past eight years, and has emerged stronger, having built a track record of positive returns. Global supply and demand growth are back in line, and this stability has led the milk price to reach new highs over the past two years. With this season’s milk price forecast of $8.50 per kgMS, returns for dairy farmers remaining firmly in positive territory. There is also now more clarity around environmental regulations, and land prices have moderated sufficiently to provide investors with the potential for a healthy cash return.
Why the Rimu Road Property?
The 172ha dairy farm is located in a prime farming area, 19 km from Invercargill. The property is well appointed, with a 40 a-side herringbone cowshed with automatic cup removers, modern effluent disposal and good homes. The farm has a strong track record of consistent performance, and its fertile soils and climatic conditions mean good pasture levels year-round, reducing the need for imported feed and other high-intensity farming methods.
The farm is operated through a 50/50 sharemilker model, which reduces operational risk for investors. The bulk of the costs most exposed to price pressures and volatility are the responsibility of the sharemilking partner. The sharemilker owns the cows, moveable plant and machinery, employs all staff and operates the farm in return for 50% of the milk income. The farm owner receives the balance 50% of the milk income. This structure often attracts the best young farmers and is an important route to farm ownership.
Why Invest in Co-op Shares?
The Partnership plans to invest 25% of its funds in Fonterra FCG and LIC (Livestock Improvement Corporation) shares, both of which are forecast to deliver dividend yields of over 10% in the coming years. As an investor, you can only access these shares if you own farmland and belong to those co-ops through supply or use of services.
Fonterra, with 80% share of the national milk supply, is back on track with a clear strategy focused around New Zealand milk and sustainability. Recent performances have matched their market guidance.
Fonterra Co-operative Group Limited (FCG) shares are forecast to deliver dividend yields of over 10% p.a based on today’s prices. As a bonus, a capital return is also forecast by 2024, meaning total dividends over 2023 and 2024 are forecast to represent 39% of the current FCG share price.
The Fonterra share structure is such that the dollar value dividend is the same for FCG as the NZX-listed FSF shares, however FCG shares are currently trading at a 15-20% discount to FSF shares, giving a higher percentage dividend yield.
LIC is listed on the NZX, and is one of New Zealand’s leading providers of dairy genetics, dairy milk testing services and herd improvement software. Their shares are currently generating a 14% dividend yield plus imputation credits.
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